No one likes to admit that they are losing or leaving money on the table with their GPO or local contracts, value analysis studies, or vendor guarantees or promises. However, the reality is that the majority of healthcare supply chain organizations just don’t know if, when, and where they are losing money on their supply expenses. To help with this challenge, here are four principles or truths that are the foundation of hospital supply expense savings validation:
1. A Savings Isn’t a Savings Until It is Validated: In no other business would we accept financial projections without verification. That’s why your supply expense savings validation is required before, during, and after your contract or saving projects are implemented. Without it, it is impossible to claim a savings has been achieved!
2. Too Often, Savings Are left On the Table Untouched: Correspondingly, we have documented that 26% to 46% of supply expense savings go unreported by supply chain departments, since they don’t verify their savings projections after a contract or savings project is completed. This deprives supply chain managers of the rewards of reporting even higher savings to their senior management.
3. Guestimates Are No Longer Good Enough: Now that numerous CFOs are booking reported supply expense savings in their healthcare organizations’ budgets, it becomes mission critical that your savings reporting is rock solid. Otherwise, you could be embarrassed when your CFO calls you asking what happened to the supply expense savings you promised.
4. Trust But Verify Your GPO/Vendors’ Promises and Guarantees: How many times has a GPO or vendor guaranteed that you would save X amount with their product, service, or technology’s portfolio? Then, you never take the time or effort to verify that the promised or guaranteed savings happen. Unfortunately, this practice too often leads to understated or overstated supply expense savings at all of our nation’s healthcare organizations. This is especially true when a hospital, system, or IDN changes their group purchasing organization.
Almost daily, we see healthcare organizations project savings that never materialize as promised or guaranteed by GPOs/vendors. That’s why we believe that savings validation is necessary to ensure that your healthcare organization realizes every dollar in supply expense savings that it has budgeted.
P.S. If you want to learn more about it, e-mail [email protected] for a copy of The Ultimate “Closed-Loop” Savings Validation Guidebook. It can make your saving validation job easier.
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